The State Bank of Vietnam and Ministry of Agriculture and Rural Development have held discussions on a new stimulus package to boost farming production chains and apply technology in agriculture.

As of now, details about the value of the package, incentives, and lending conditions are yet to be revealed. Major stakeholders are seeking lending mechanisms that can reassure banks to offer loans to farmers and use the Government's support policy.

Although presently the State Bank encourages credit institutions to offer loans to farmers, they are hesitant because of high risk and the borrowers usually do not have collateral.

In a cabinet meeting last month, the Government requested the State Bank to work with the Ministries of Agriculture and Science and Technology to outline a credit programme for the agriculture sector that provides preferential loans for models that promote the linkage of farming production chains, scientific and technological application, and the linkage between production and export.

Director of State Bank's Credit Department, Nguyen Viet Manh, stated that time and detailed regulations were needed to launch a new stimulus package for agriculture.

"To ensure the effectiveness of the package, they have to review planning on the sub-farming sectors, production areas, and the linkage of input and output," he noted, adding that comprehensive examination can lead to sustainable financing or even banks will be able to offer loans to borrowers without the need for mortgage.

The package will also target large-scale production models and land consolidation.

Vice Director of State Bank's branch in HCM City, Nguyen Hoang Minh, claimed that this year, credit for farming and rural areas will focus on projects that applied technology or are related to farming product processing in order to improve the quality and competitiveness of the products.

Chairman of Viet Nam Farmers' Association Nguyen Duy Luong remarked that although since 2010, the government has passed a decision on credit for agriculture, rural areas, and farmers, the crediting was still limited.

Beneficiaries somehow failed to show interest in such preferential loans due to limited access.

For instance, banks will not offer another loan if the borrowers did not pay the previous ones, Luong reported, noting that the requirement was too strict.

Former governor of State Bank Cao Sy Kiem stated that a lending mechanism based on production chain was new but reasonable, as it can meet the capital demands of farmers and farming enterprises and will help the banks to recover the issued loans.

This will help to avoid scattered loans, he remarked.

This year, loans for agriculture are expected to be worth VND35-37 trillion (US$1.67 billion–1.76 billion), about 70-85 per cent higher than that of last year. Currently, the interest rate for agriculture loans are less than nine per cent per year and the State Bank is encouraging banks to lower the rate.

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